US-China trade war hits third anniversary, with no sign of Joe Biden easing economic pressure

·5-min read

Three years after the US and China began a tit-for-tat trade war, the tariffs imposed by the Trump administration remain in place on most Chinese goods, and bilateral tensions have extended beyond trade to encompass a range of geopolitical and human rights issues under US President Joe Biden.

Since the signing of the phase one deal in January last year, Beijing has repeatedly urged the US to roll back its punitive tariffs on Chinese products and called on the American business community to help convince Washington. But US officials, including Trade Representative Katherine Tai, have said the tariffs will remain in place for now.

Although Biden has not pushed his China trade agenda to the front pages of the newspapers like his predecessor, he has very much carried on what Trump initiated, analysts said.

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In the United States, a new bipartisan consensus has emerged about “being tough” on China, with members of Congress eager to use the tariff war as leverage to demand more structural changes from Beijing.

Biden will at some point seek to put his own authority on trade relations so we may see small tweaks to the phase one trade deal in the future, assuming China believes it’s in its own interest to do so

Bryan Mercurio

Given it was only China that made concessions under the phase one trade deal, it would be surprising if Biden rescinded the agreement, said Bryan Mercurio, a professor specialising in international economic law at the Chinese University of Hong Kong.

Furthermore, the US can now use China’s failure to live up to its commitments under the agreement to gain an advantage in future negotiations and broader diplomatic relations, he added.

“That being said, Biden will at some point seek to put his own authority on trade relations so we may see small tweaks to the phase one trade deal in the future, assuming China believes it’s in its own interest to do so,” Mercurio said.

Shi Yinhong, a professor of international relations and adviser to the State Council, China’s cabinet, said it will be very difficult for Beijing and Washington to relaunch trade negotiations “in the foreseeable future” and a mutually acceptable agreement would be “very difficult”.

“The trade war will continue, at least for the near future,” he said.

Is there still a trade war under Joe Biden’s presidency?

But he added two positive signs had emerged in recent months. China has been buying US agricultural products and Vice-Premier Liu He has spoken to both Tai and US Treasury Secretary Janet Yellen since May. Last month, Commerce Minister Wang Wentao also spoke with his American counterpart Gina Raimondo.

Under the phase one deal, China has committed to buying an additional US$98.2 billion worth of covered goods this year on top of 2017 levels, although purchases have fallen behind target, partly due to the coronavirus pandemic.

China’s purchases of US goods from January to May reached only 69 per cent of the year-to-date target based on Chinese import data, and only 62 per cent of the target based on US export data, according to the Peterson Institute for International Economics.

While the two countries initially sparred over trade and economic policy, fraught relations now touch on things like Xinjiang, Hong Kong, Taiwan and other areas that are much trickier to find consensus on.

I think the chances of a meaningful de-escalation in US-China tensions are pretty slim

Nick Marro

“Complicating this is the fact that the US’ pursued actions that touch on things like supply chain and investment policy, which have woven together these economic and political issues in ways that will be difficult to disentangle,” said Nick Marro, lead analyst for global trade at The Economist Intelligence Unit.

“As a result, I think the chances of a meaningful de-escalation in US-China tensions are pretty slim.”

Stephen Olson, a former trade negotiator with the Office of the United States Trade Representative, said anyone who hoped for a quick wind-down of the trade war under Biden will be disappointed, because his China policy has not diverged in a substantive way from that of his predecessor.

“At some point, the US will have no choice but to engage with China on the tough structural issues that have plagued the trade relationship,” said Olson, who is now a senior research fellow at the Hinrich Foundation.

“The administration has not yet tipped its hand as to what it hopes to accomplish.

“Biden’s intention to pursue a US worker-centric trade policy, along with his desire to put human rights at the heart of foreign policy, will ensure that any trade talks with China will be tough going.”

Biden’s trade strike force sees US turn to aggressive ‘industrial policy’ to counter Beijing

The White House announced last month it would establish a trade strike force led by Tai to halt the “hollowing out” of American industry and the erosion of critical supply chains for products such as semiconductors and medicines.

Bryan Mercurio said he does not expect the supply chain review to affect trade in the short term, as it is private companies and not the US government that imports goods from China.

“In order for any restructuring of the supply chain to take place in any sector, the government will have to make it financially attractive through subsidies or other sweeteners. I do not see this happening on a large-scale basis,” he said.

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